Hon.
Speaker Sir, Article 123 of the Constitution of India which provides for the
power to promulgate ordinances during recess of Parliament has certain very
specific trigger phrases and these trigger phrases need to be activated in
order to shift the burden of law making from the legislative institutions
to the Executive. At a point in time when our GDP growth rate had been in a
free fall for seven quarters preceding the lockdown and when all economic
activities during the lockdown had come to a complete standstill, there was
absolutely no rationale for promulgating this Ordinance, especially when the
Banking Regulation (Amendment) Bill was under consideration in this very House.
The more appropriate way for the hon. Finance Minister120 would have been to withdraw the Bill
when this Session commenced and she could have brought another Bill with
all140 the necessary
amendments for the consideration of this House. This resort to
the Ordinance route in order to make laws160
is something which undermines the majesty of the Parliament and it only
exacerbates the attack on our legislative institutions. My second point is that
this particular Ordinance falls foul of Article 123 of the Constitution of
India also. The objective of this Ordinance is to bring district cooperative
banks and urban cooperative banks under the control and supervision of the
Reserve Bank of India. However, this particular Ordinance falls foul of Entry
32 in the State List. While I concede240
that Banking is within the purview of the Union List in terms of Entry 45, the
hair-splitting which the hon. Finance Minister has attempted by trying to
segregate primary agricultural credit societies and long-term credit societies
from district cooperative banks280
and implement the same template in the urban areas also, is going to create
utter mayhem in the agricultural economy, because of the symbiotic linkages
between the primary agricultural credit societies and long-term credit
societies and the district cooperative banks. 320
The final point that I would like to
stress and underscore is that the record of the Reserve Bank of India with
regard to being able to pre-empt malfeasance or what is colloquially called
‘scams’ in the banking sector is360
very mixed. I do not want to belabour that the Yes Bank, Punjab and Maharashtra
Cooperative Bank, ILFS and Diwan Housing Finance Limited are
instances of malfeasance which have taken place when these institutions were
under the direct superintendence of the Reserve bank of India. I humbly
submit that the Reserve Bank of India is in itself a conflicted institution420 by design. It is the regulator of the
banks; it is the investment banker of the Government; it is the owner,
operator, regulator and player on the bond market; it is the manager of the
Government’s credit and monetary policies; it is the foreign exchange
regulator; and it is the currency regulator, and the list goes on and on. If480 there is a need to bring about
substantive reform, the need is to unscramble this egg called the Reserve Bank
of India and segregate its various functions by spinning them off into
different instrumentalities so that the primary function of the Reserve Bank of
India as the regulator of the Indian banking system can be primarily
discharged. My humble appeal to the hon. Finance Minister is this. Let us
leave the cooperative sector alone. If there have been instances of560 malfeasance in district cooperative
banks and urban cooperative banks, there are as many success stories which have
played themselves out in the past seven decades. State Governments are more
than competent to discharge their functions and in a federal polity,600 this Ordinance, and the Bill which seeks
to replace it, is a frontal assault on the federal structure of the
Constitution and this will have long-term implications on the
democratic polity of India. I once again urge the hon. Finance640 Minister to withdraw this Bill
and let this Ordinance be disapproved by a Statutory Resolution.
Otherwise, this House will be witness to another blow which is being dealt to
federalism and which would have long-term implications on the polity of
this country.
The
hon. Minister, while introducing the Bill, started by saying that this Bill
is being brought to protect700
the urban cooperative banks and the depositors. My question to the hon.
Minister is this. The Reserve Bank of India’s720
FSR report of December 2019 says that the State-run banks account for 90 per
cent of frauds by value; private banks account for 9 per cent; and foreign
banks, 0.4 per cent. This says a lot about the internal controls in the
State-run banks. What is the Government doing? Their hollow claim has been
badly exposed by the Reserve Bank of India’s report itself. My second question
to the hon. Minister is this. The Punjab National Bank was hit with800 Rs. 23,000 crore scam and we know Mr.
Nirav Modi fled and no heads have rolled so far. The third question is about
the Modi Government’s real concern about the PMC Bank. When it came to Yes
Bank, the State840 Bank of
India immediately infused funds into Yes Bank. Why is this stepmotherly
treatment there for PMC? Sixty people have committed suicide. What is the
interest that Government had with Yes Bank and that same love is not shown
towards PMC Bank? What kind of administrator is working in PMC Bank for last one
year? The honourable person has not been able to sell the yacht which is stuck
in Sri Lanka; two aircrafts are stuck at Mumbai airport. This is the love of
this Government for PMC Bank’s depositors who are suffering day in and day
out. The Bill talks about issue of equity preference shares by
way of public issue and private placement. Are you trying to say960 that now Securities Exchange Board of
India will interfere in it? Please enlighten all of us. The Reserve Bank
of980 India is being given
power as claimed by the Government. If that is the case, why did Yes Bank and
many other scams happen in March 2020? What was Reserve Bank of India doing?
What was this Government doing? How did they allow these things which happened
right under the rule of Mr. Modi? Since demonetization, the financial industry
slowly and steadily started collapsing and showing how regulation by Reserve
Bank of India, Securities Exchange Board of India and NABARD is completely
absent. The banks are now suffering. I feel one of the reasons is this
unplanned decision of demonetization. 1080
The above frauds reported by banks have increased by 28 per cent. Who is
responsible for this? One of my colleagues told me that the Bank of Maharashtra
should not be privatized because it is running in profit. The1120 Government should not do it. The Modi
Government has this habit of weakening the federalism and encroaching upon the
State List. You know for a fact what a State List is and what the Central List
is. Why do you bring such legislation? What are your designs? Why do you want
to weaken the federalism of this country which is the basic structure
of the Constitution? My last point is about the proportional voting rights.
If they buy equity shares in1200
cooperative society, it is a known fact that one member has one vote. Are you
going to overrule that? Is it not a fact that in 2006, the Vishwanathan
Committee had recommended that cooperative banks should be allowed to raise
capital through non-voting shares? These are the important points to
which the hon. Minister should reply. For God’s sake, 1260 I do not want the hon. Minister to say
that all these cooperative banks, Punjab National Bank, Franklin Templeton, 1280 etc. were acts of God. These were not
acts of God. They happened because Mr. Modi is ruling the country and because
of the misgovernance.
This
year, the Banking Regulation (Amendment) Act was introduced in the Budget
Session but the same could not be passed. In June 2020, the hon. President had
promulgated the Ordinance but it was withdrawn on the first day of this Session
and a new Bill has been introduced. We are speaking on this Bill right now.
This Bill is to empower the Reserve Bank of India to effectively handle the
mishaps or the adversaries in private banks and also in the cooperative banks
without any loss of public confidence or disruptions and will allow the Reserve1400 Bank of India to prepare the
reconstruction scheme for failed banks without having to first make an order of
moratorium on barring deposit withdrawals. This will enable the Reserve Bank of
India find suitable suitors for a stressed bank. 1440 The hon. Finance Minister has given the classic
example of Yes Bank. Its subsequent rescue has prompted the hon. Prime
Minister, Shri Narendra Modi to strengthen the hands of the Reserve Bank of
India on this front. Coming to this Bill, I would like to tell why this
amendment is crucial. We need to go back to see how many cooperative bank scams
have happened in India as also various malpractices and their
implications in these cooperative banks. We know that the
cooperative banks were established in India to facilitate rural credit and to
cater to the needs of small farmers and businessmen. They were popular with middle
and lower-income groups because of the high interest rate they
offered as compared to the commercial banks. However, with the passage
of time, most cooperative banks lost their purpose. Excessive State control and
politicization further led to their deterioration. 1587
